Where's The Recovery???

Here's a challenge: turn on any news channel or stock market show and see if you can go five minutes without hearing some Ivy League blue blood opining about this incredible bull market and the continuing recovery. They cite earnings, balance sheets, employment numbers, and a plethora of other "Wall Street" stats. It's actually pretty convincing, at least until you talk to your neighbor who hasn't worked in ten months and who is raiding his IRA in a futile attempt to keep his house out of foreclosure. So, why the huge discrepency? Why is this magical land of 7 figure bonuses and penthouses overlooking Central Park that we call Wall Street seem to be swimming in cash while the rest of us are hawking family heirlooms so we can afford to fill our gas tanks? Before I attempt to answer that question, lets go over what has been taking place in the market.

For the most part, stocks continue to go up. The relentless upward trend continues but is failing to keep up with rising commodity prices such as gold, oil, timber, silver, and natural gas. As I have said before, this trend will continue as long governments, namely ours, continue to print money and devalue our currency. Personally, I don't see any sign of the money printing subsiding. We continue to love gold and oil. Natural gas seems to be gaining some momentum as our brilliant politicians begin to reluctantly accept the fact that wind and solar technology are nowhere near being able to power this country. Domestically, the US has more natural gas than the Middle East has in oil reserves. What fuel, other than natural gas, do you know of that you can burn in your home 24 hours a day without sacrificing the quality of the air that your family breathes? Natural gas is clean and is just as effective in providing power as coal and gasoline. Natural gas will be a vital part of our energy independence going forward. Silver continues to move sharply upward as investors continue to believe it is undervalued compared to gold. Be careful with silver. Rising inflation should push silver higher but don't expect it to keep up with gold. A lot of people out there are misunderstanding the difference between the two metals. Gold is being traded and treated as if it were an actual currency. It is seen as a shelter from all of the currency devaluation. Silver may go higher for many of the same fundamentals that are pushing gold higher. However, simply put, silver isn't gold. When the proverbial excrement hits the fan, governments and institutions want to own gold. Gold is in much shorter supply than silver and is a hallowed and intimate aspect of both Chinese and Indian cultures. Gold is the true currency hedge. Be wary of higher silver prices. In my humble opinion, silver is riding golds coat tails. Companies will begin to announce first quarter earnings in the near future. I'm paying close attention as I believe that these higher commodity prices will begin to erode corporate earnings. In the short term, I expect this market to continue to drift upward. BUT, I'm being very careful as global conflict and rising material costs could bring an ugly and sudden end to the party.

So, where is the recovery? Why are companies posting record profits while the rest of us are sucking wind? Well, in an attempt to "save" the economy, the government has been pumping unheard of amounts of cash into the market. Why isn't this money filtering down to the average worker? Well, if someone handed you a million bucks right now, would you be lending it out or purchasing businesses in this market? I certainly would not. I would be investing in inflation proof assets and staying liquid in case this economy and market takes another tumble. Well, corporations are doing just that. Business is just as hazardous and precarious as it was 3 years ago. Costs are going up and tax rates are just as penal as they were before the crash. Washington, in their infinite wisdom, have stuffed the pockets of corporations hoping that money would filter down and feed into the economy while taking no measures to decrease the cost and risk of doing business. In my humble opinion, we would have been much better off cutting corporate taxes and employment taxes. This would make the cost of doing business much less and encourage companies to actually do more business and make more money. In other words, to benefit from lower taxes a company MUST do more business. In order to do more business you have to hire more people. As companies begin hiring more people, they begin to compete for talent and are forced to raise wages to stay competitive. Corporate America would still be able, through lower costs, to build up the large cash stores they currently enjoy but only by actually doing more business. As it currently stands, they have all the cash WITHOUT having to take the risk and do anymore business. Essentially, this money pumping is actually preventing corporations from hiring and expanding; they simply don't need to. Many of the politicians claim we can't afford more tax cuts. Well, that is true only because we have spent ourselves into oblivion through all of this "stimulus" spending. If we are going to spend the money one way or the other, why not spend it in a way that actually encourages investment and expansion rather than hoarding? But, now I'm assuming that politicians actually make sense and are capable of making rational decisions. Who's the idiot now??